U.S. Senators Maggie Hassan of New Hampshire and Thom Tillis of North Carolina have reintroduced a bipartisan bill, the Middle Class Mortgage Insurance Premium Act, that would cut taxes for middle-class homeowners by restoring and permanently extending an expired tax deduction for middle-class homebuyers with mortgage insurance (MI), as well as expanding the number of families who can qualify for the tax deduction.
“Homeownership is increasingly out of reach for many families in the Granite State and across the country. This bipartisan bill would cut taxes for middle-class families, helping them to buy a house and afford their mortgage,” said Sen. Hassan. “I will continue working to address the housing crisis in New Hampshire.”
Most homebuyers who cannot make a 20% down payment are required to buy MI. Between 2007 and 2021, homeowners could take a tax deduction for premiums paid on MI. In 2020, middle-class homebuyers got an average mortgage insurance deduction of $2,100 according to IRS data, but this tax cut expired in 2021.
The bipartisan Middle Class Mortgage Insurance Premium Act would restore and permanently extend the MI tax deduction, and expand the deduction to more taxpayers by increasing the income limit from $100,000 to $200,000 per family.
“With housing prices at record highs and rising interest rates to combat inflation, homeownership has become more unaffordable than ever,” said Sen. Tillis. “I am proud to co-sponsor this bill to provide tax relief for middle-class families so more Americans have an opportunity to own a home.”
The Middle Class Mortgage Insurance Premium Act was originally introduced in February of 2022 by Sen. Hassan and Roy Blunt of Missouri.
“We thank Sens. Hassan and Tillis for reintroducing legislation that will make permanent and enhance the ability of middle-class homeowners to deduct private and government MI premiums on their individual federal income tax returns,” said Seth Appleton, President of U.S. Mortgage Insurers (USMI). “This targeted tax cut helps make homeownership more affordable, which is especially important in today’s low inventory, higher interest rate housing market. Millions of homeowners have benefited from this deduction since 2007, resulting in critical tax relief for first-time, low- to moderate-income, and minority homeowners. USMI urges swift passage of this bipartisan legislation.”
Last November, USMI joined a coalition of housing finance organizations, including the American Bankers Association (ABA), Mortgage Bankers Association (MBA), National Association of Home Builders (NAHB), and National Association of Realtors (NAR) in sending a letter to the Senate Finance Committee Chairman Ron Wyden urging his Committee to support existing homeowners and prospective homebuyers by modifying current law to make the MI premium tax deduction permanent and increase its income phaseout.
According to USMI, data through tax year 2020 shows that an average of 3.3 million homeowners claimed the deduction annually and received an average deduction of $1,427. In aggregate, the MI tax deduction has been claimed 43.2 million times, totaling $61.6 billion of tax relief for American families between 2007 and 2020.